Lifetime mortgages cheaper than lifetime trackers

Lifetime mortgage rates are cheaper than the standard variable rate mortgages charged by the nation's largest mortgage lenders.

That is according to new research by Ship (Safe Home Income Plans), showing the average rate of interest charged by the top ten equity release providers is 6.39 per cent, considerably lower than the 7.32 per cent charged by the top ten mainstream mortgage lenders on their standard variable rates.

"This [research] continues to counter critics' claims that equity release lending is prohibitively expensive and an option of last resort," said Jon King, chief executive of Ship, the trade body representing over 90 per cent of the equity release sector.

The new figures, correct as of May 18th 2007, show the gap between standard variable rates and lifetime mortgage rates has been increasing in recent months.

In September the gap between the average lifetime mortgage from a top-ten provider and the average standard variable rate charged by a top-ten mortgage lender was 0.35 per cent.

This has now increased to 0.93 per cent after the Bank of England hiked interest rates three times and new rules came into force surrounding lifetime mortgages.

"Since April this year the whole of the equity release market has become fully regulated by the FSA [Financial Services Authority]," explained Mr King.

"Ship has also continued to campaign to raise the standards of advice available to consumers through calling for compulsory examinations for IFAs offering Ship members' products and issuing advice checklists adhering to a stringent code of conduct."

Ship members also offer interest rates fixed for life and include a "no negative equity" guarantee on loans.

"With these rising standards and the low interest rates highlighted above, it has literally never been safer or cheaper to take out equity release and in many cases it can offer a very viable solution to older peoples' financial needs," Mr King concluded.